What You Need to Know
- Rising markets and job movement due to the pandemic are driving these moves, according to the Secure Retirement Institute.
- Rollovers are expected to increase even more in the next five years.
- Financial professionals were the largest influence in directing the move from DC plans.
Defined contribution savings are being rolled into IRAs at a record rate, largely due to the pandemic’s impact on job dislocation, according to a study by LIMRA’s Secure Retirement Institute. The study looked at what drove investors to make these decisions and who had the greatest influence in the decision.
Typically, DC plan participants who retire or change jobs roll more than $500 billion a year into IRAs, according to the study, which predicts rollovers will exceed $760 billion annually within five years. In 2019, rollovers were $565 billion, while in 2020, the pandemic year in which millions lost jobs, $623 billion was rolled over.
Much of this growth is due to “the accrual of balances in workplace savings plans,” but these “rollovers rank among the largest financial transactions Americans will make,” the study notes.
The study, “Money in Motion: Understanding the Dynamics of the IRA Rollover Market,” found that six in 10 of investors ages 40 to 75 who recently left jobs moved their DC plan savings into IRAs.